Entrepreneurs as black sheep

Nick Hanauer, co-founder of aQuantive, an early investor in Amazon.com and a founding partner at Second Avenue Partners, delivered an interesting talk today at the Entrepreneur University in which he described what it takes to start a successful new business.

Nick Hanauer

Hanauer’s talk emphasized the need for entrepreneurs to seek out ideas that fall between the cracks, ignoring what is “hot” with venture capitalists. By the time a venture capitalist in Silicon Valley or Seattle gets wind of an idea, Hanauer said it is usually too late.

Truly transformational business ideas are usually derided by investors, who can’t get their head around the idea or think it is just stupid, he said.

“There is nothing harder about being an entrepreneur than being the black sheep,” said Hanauer, adding that most entrepreneurs have personality traits that “border on the sociopathic.”

Emphasizing his point, Hanauer said that it was extremely difficult to raise money for Amazon.com, HouseValues and The Insitu Group because the ideas were considered somewhat crazy.

“When Jeff Bezos and I started telling people that we were going to start selling books on the Internet, most people thought that was the dumbest idea they had ever heard,” recalled Hanauer.

At the time of his investment in HouseValues, Hanauer said that most venture capitalists were only interested in “portals.” “We couldn’t raise a dime of venture capital,” said Hanauer, who made the decision to invest in the Kirkland online real estate company within 45 minutes of the initial pitch.

It was the same situation when Second Avenue led the investment in The Insitu Group, a maker of unmanned aircraft. No one in the venture community had any idea what an unmanned aircraft was, he said.

“It is finding these things in the cracks when true value …and big money is made,” he said.